Estimating the Welfare Gains from Public Schools in Rural India

Abstract

We adapt recently developed econometric techniques to estimate the distribution of welfare gains from public schools in rural India. Individuals have preferences over school quality and income spent on other goods. In a situation where both private and pubic schools are available, we define the cash-equivalent value of the public school as the hypothetical income sacrifice that would equate an individual’s utility to his/her utility when only the private school was available. We apply this procedure to data on income, enrollment and school quality from the Indian Human Development Survey of 2012 and estimate the distribution of implicit transfers across states and income deciles. We find these transfers are progressive. Poor households receive more on average because they have higher fertility and because their children are more likely to attend state schools. We also find however that transfers are particularly small for some of the poorest states in central and eastern India because of their low public school quality. Our methods can be generalized to measure the distribution of benefits from other types of public goods and government services.

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Notes

  1. 1.

    See Kingdon (2017). Estimates of the share of children attending private schools vary across data sets because of differences in sampling frames, in the definition of “private” and in the age-group considered. Most estimates for rural India lie in the 20-30 per cent range.

  2. 2.

    For example, Chapters 7 and 8 in Van de Walle et al. (1995) use this approach to examine the distribution of benefits from public education in Peru and Pakistan respectively.

  3. 3.

    The price calculations are based on an average of 9 and 6.6 students per village for state and private schools respectively. We have fewer observations for quality (and average of 4.5 students for state schools 3.1 students for private schools) because the test was only administered to children above 8 whereas costs are available for all primary school children. Religious schools are placed in the private school category.

  4. 4.

    This is after we remove households with zero or negative income. This reduces the number of household by 1.8 percent. Negative values are most commonly reported for farm income.

  5. 5.

    This increase in the variance of poverty rates across states is consistent with findings in Kjelsrud and Somanathan (2017a).

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Correspondence to Debopam Bhattacharya.

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Bhattacharya, D., Kjelsrud, A. & Somanathan, R. Estimating the Welfare Gains from Public Schools in Rural India. Sankhya B (2019). https://doi.org/10.1007/s13571-019-00213-x

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Keywords and phrases

  • Targeting
  • Public programs
  • Binary choice
  • Cash equivalent

AMS (2000) subject classification

  • Primary 91B42
  • Secondary 91B82